What giant energy profits?

No matter. According to Sir John Major, Miliband’s head is very much in the right place, even if he is wrong about how to use it. Sir John therefore suggests a windfall profits tax, the proceeds of which would be recycled into lower bills or subsidising low-income households.

This is an equally hare-brained idea that leads you seriously to question our former prime minister’s self-cultivated image as Britain’s favourite elder statesman, filled with wise counsel and sound advice. Precisely what is it that Sir John proposes to tax? In the first nine months of this year, Scottish Power, one of the big six energy providers, actually made a loss on its generation and supply business. How do you impose a windfall profits tax on a company that is making no profits?

There’s a certain amount of logic there, yes.

14 comments on “What giant energy profits?

  1. There usually is a lot of logic from this particular commentator. However, if he indulges in the “My God, the French and the Chinks” sort of ‘patriotism’ that he did the other day, then he becomes no better than his colleague Geoffrey Lean.

    Mr Warner, your standards dropped.

  2. “Miliband’s head is very much in the right place,” As Milliband’s head spends most of it’s time up Milliband’s arse, I can only admire Sir John’s percipience.

  3. It’s a highly regulated industry. If they make losses it can only be through sheer blithering incompetence.

    The last time the government tried a windfall tax N Sea exploration practically stopped.

  4. Even if they were making profit, no-one seems to have explained how the government taxing the price increase reduces granny’s heating bill.

  5. If I was PM, Major would be stripped of his knighthood and any pensions he may receive would be instantly and permanently confiscated. In addition, if there was some way that the law could be fiddled so I could beat the shit out of him (eg-”witnesses” who can be relied on to swear we had a confrontation and he threw the first punch–losing his dosh would be a credible reason for even that grey idiot to lose his cool as well)that would be step three. Remember–if there had been no Major there very likely would never have been a Bliar.

  6. Honest question…
    People I argue with keep banging on about excess profits by the energy companies. I point out Centrica’s 10% return on income in its accounts and such. They then start blethering about profiteering in the wholesale markets. Is this so? The caveat that Scottish Power is losing money “on its generation and supply business” implies that they’re making money elsewhere. Wholesale profits are part of the costs the end consumer pays, n’est pas? Is it then possible that the companies are masking profits by lumping them in as part of wholesale costs to the consumer?

    Like I say, this is an honest question because I just don’t know, so please don’t jump down my throat. In any case, 10% overall return on turnover in the published accounts seems reasonable enough to me.

  7. Well, that’s a little bit of a trick. Aren’t the months he has excluded precisely the time when the power companies make their profits? What with us not needing so much leccy and gas in the middle of summer, you see.

  8. Noel Scoper

    A similar logic has been applied by Miliband in promising a windfall tax on tjhe profits of ‘pay-day lenders’. So, instead of finding ways of reducing the poor buggers borrowing costs (I know, I know, but play along with me), he promises that a Labour gov’t will help itself to a share of poor peoples’ money as well. It sure as hell ain’t going to help the poor.

  9. Am I alone in thinking that Sir Major is actually being very sarcastic in saying: if the energy companies are making exorbitant profits, let’s tax them.

    So, if it is proven that the energy companies are not actually making exorbitant profits, no tax will be levied and Labour’s claim of excess profits will be shown to be groundless.

  10. One’s respect for John Major disappeared with the Edwina Currie revalations. That mental picture is still apt to cause a “dry boak”.

  11. Neil Scope: it makes no sense at all.

    If the company is interested in maintaining post-tax profits, then increasing the tax means they’ll have to increase their pre-tax profits, which means increasing income and thus prices.

    If the company is only interested in pre-tax profits (unlikely), taxing them will make no difference to consumers. The only difference is that more feathers from a goose that doesn’t hiss allows more spending elsewhere

    So for consumers it’s either harmful, or at best irrelevant; it might have political value.

    Hmmm….

  12. Geoff Taylor,

    Is it then possible that the companies are masking profits by lumping them in as part of wholesale costs to the consumer?
    That’s the claim, iiuc; that a generating company sells power to the retail company at a profit and both are owned by the same company. It is claimed that there is profiteering going on there.

  13. TJGM beat me to it.
    A windfall profits tax would only bite on windfall profits and Centrica (“British Gas”) stated in its RNS announcement (lies wherein coulkd get the directors jailed in the USA) that British Gas had been making losses for several months on its residential supply business. I suspect that a big tax rebate on windfall losses would be quite welcome

  14. Freezes and windfall taxes, although economically destructive, are politically very attractive because the British people HATE their energy suppliers. The big six are constrained into a cartel by the OFGEM statists, the little ones are boutique tree huggers, and all treat their customers with contempt. If you have an idle half hour Google ‘gas forced entry’ for examples.
    I predict the party that beats this industry up the most will win the next election.

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